Tenant Estoppels and SNDAs: A Field-by-Field Review Guide

In a single-tenant net lease acquisition, the tenant estoppel is the only document in the file signed by the party that pays the rent. The seller makes representations, the broker prepares the offering memorandum, and the buyer’s team abstracts the lease. The estoppel is where the tenant itself says what it believes the deal is. When those accounts disagree, the estoppel is usually the one that tells you something new.

The SNDA is its companion document. It matters less to the buyer’s view of the lease and more to the lender’s ability to finance it, but it is negotiated with the same tenant, often on the same timeline, and frequently by the same people. This guide covers what to request in each, how to review an estoppel against the lease field by field, and which findings should stop a deal or change its terms.

What an estoppel certifies

An estoppel certificate is a signed statement by the tenant confirming the status of its lease as of a date. The legal effect, broadly, is that the tenant may be prevented, or estopped, from later asserting facts that contradict what it certified to a party who relied on it. The exact effect depends on the form, the lease, and the governing law, which is why counsel should review the form before it goes out.

Two practical points follow. First, an estoppel is only as useful as the questions it asks. A short form that confirms the lease is “in full force and effect” protects much less than one that states the rent, the term, and the absence of defaults. Second, the estoppel is a snapshot. It speaks as of its date, so a certificate dated weeks before closing may need to be brought down or refreshed, depending on what the PSA and lender require.

Check the lease before you draft the request

Most commercial leases include an estoppel clause. Read it before preparing the request, because it governs what you can ask for and how long the tenant has to respond.

• Response period. Leases commonly give the tenant a set number of days after request, and the period varies from lease to lease. Count it against the closing date and the financing timeline.

• Required content. Some leases list the statements the tenant must make. If the request asks for more, the tenant may strike the extras.

• Form. Many national and credit tenants will only sign their own form, regardless of what the buyer sends. Plan for it.

• Frequency limits and fees. Some leases cap the number of requests per year or allow the tenant to charge for review.

• Deemed confirmation. Some leases provide that a tenant who fails to respond is deemed to have confirmed certain facts. That may help in a dispute, but lenders and buyers rarely accept a deemed estoppel in place of a signed one.

Also check the PSA. The estoppel is usually a seller deliverable and a closing condition, and the PSA may specify the form, how recent it must be, and what counts as an acceptable estoppel. A provision that the estoppel must not disclose any material default or discrepancy gives the buyer a remedy if it does.

The fields to request

For a single-tenant net lease, a complete estoppel request typically asks the tenant to confirm the following.

1. Lease documents. A list of every document that makes up the lease: the original lease, each amendment by date, side letters, and commencement date memoranda. Ask the tenant to confirm there are no others.

2. Parties and premises. The tenant’s exact legal name, the landlord, and the premises, including square footage if relevant to rent.

3. Commencement and expiration. The commencement date, rent commencement date if different, and current expiration date.

4. Renewal options. The number and length of remaining options, and whether any have been exercised.

5. Current base rent. The monthly or annual amount and the date through which rent has been paid.

6. Future rent changes. The next scheduled increase and its date, or confirmation of the escalation method.

7. Additional rent. How taxes, insurance, and common area or operating costs are paid, and whether any reconciliation is open or disputed.

8. Prepaid rent. Whether any rent has been paid more than one month in advance.

9. Security deposit. The amount held, if any, and its form.

10. Defaults. Whether, to the tenant’s knowledge, the landlord or tenant is in default, and whether any event has occurred that would become a default with notice or time.

11. Offsets, credits, and abatements. Whether the tenant claims any right to offset rent, any outstanding free rent, or any unpaid tenant improvement allowance or landlord work.

12. Purchase rights. Whether the tenant holds a right of first refusal, right of first offer, or option to purchase, and, if so, whether it has been waived for this sale.

13. Termination rights. Any right to terminate early, including after casualty or condemnation, or on a co-tenancy failure.

14. Assignment and subletting. Whether the tenant has assigned the lease or sublet any portion of the premises.

15. Guaranty. Whether a guaranty is in effect and the identity of the guarantor. A separate guarantor estoppel is often worth requesting.

16. Reliance. A statement that the buyer, its lender, and their successors may rely on the certificate.

How to compare the estoppel to the lease

The review is a reconciliation, not a read-through. Put the abstract of the lease and amendments in one column, the estoppel in the next, and work field by field. For each field, the answer is one of three: matches, differs, or not addressed.

The figures above are illustrative. The pattern is common. A tenant lists an amendment the seller never delivered, and that amendment explains a different expiration date and, often, a different rent. Every “differs” should be resolved before diligence closes or before the estoppel condition is satisfied, whichever comes first. Every “not addressed” should be either followed up or consciously accepted.

Keep the comparison tied to sources. For each lease value, note the section and page where it appears. When a discrepancy goes to counsel, the seller, or the investment committee, the reviewer should be able to show both documents side by side rather than describe them from memory.

Red flags

Rent discrepancies

A difference between the rent in the estoppel and the rent in the lease, rent roll, or offering memorandum goes directly to value. In an illustrative deal priced at a 6.25% cap rate, a $15,000 annual rent difference moves value by $240,000. Determine whether the difference comes from an amendment, a missed escalation, a rent concession, or an error, and whether the PSA lets the buyer adjust price or terminate.

Defaults and pending disputes

A tenant that claims a landlord default, such as unperformed roof repairs or an unpaid allowance, is signaling a cost the buyer may inherit. A tenant that discloses its own default is signaling credit risk. Either can be a reason to renegotiate or walk.

Offsets, credits, and abatements

Claimed offset rights reduce the cash the buyer will actually receive. Look for unpaid tenant improvement allowances, disputed reconciliations, and abatement rights tied to landlord obligations. If the seller owes the tenant money, the PSA should require the seller to pay it at or before closing or credit the buyer.

ROFR, ROFO, and purchase options

A tenant right of first refusal on sale is a threshold issue. If the right has not been properly offered, waived, or lapsed under the lease’s procedure, the tenant may have a claim against the property after closing. The estoppel should confirm that the right has been waived for this transaction, or the seller should deliver a separate waiver.

Unrecorded or undelivered amendments

An amendment the tenant lists but the seller did not deliver is a document-control problem at a minimum and a misrepresentation at worst. Obtain a copy, re-abstract the affected terms, and reconsider the underwriting with the amended terms.

Assignments and subleases

An assignment may have changed the tenant entity, and with it the credit. A sublease may mean the operator in the building is not the party obligated on the lease. Confirm who is bound and whether the guarantor remains liable.

Qualifications

Watch for knowledge qualifiers, “to the best of tenant’s knowledge,” and carve-outs added by the tenant. Some are routine. Others hollow out the certification. Counsel should decide which are acceptable.

SNDA basics

A subordination, non-disturbance and attornment agreement is a three-part agreement among tenant, landlord, and lender.

• Subordination. The tenant agrees that its lease is subordinate to the lender’s mortgage or deed of trust.

• Non-disturbance. The lender agrees that if it forecloses, it will not terminate the lease or disturb the tenant’s possession so long as the tenant is not in default.

• Attornment. The tenant agrees to recognize the lender, or a buyer at foreclosure, as its landlord.

Why lenders require them

In a net lease loan, the lease is the collateral’s source of value. Depending on the jurisdiction and the recording order, a foreclosure can affect a lease that is subordinate to the mortgage, and a lease that is senior to the mortgage can bind the lender to terms it did not underwrite. The SNDA settles priority by agreement: the lender gets subordination and attornment, and the tenant gets assurance that its lease survives foreclosure. Lenders also commonly negotiate protections, such as not being bound by prepaid rent beyond one month, by amendments made without the lender’s consent, or by offsets arising from a prior landlord’s defaults.

What to check

• Whether the lease obligates the tenant to sign an SNDA, on what conditions, and within what period. Many leases condition subordination on the lender providing non-disturbance.

• Whose form is used. Credit tenants often require their own, and tenant and lender counsel may need several rounds to agree.

• Whether lender protections conflict with tenant rights in the lease, such as offset rights or purchase rights, and how the SNDA resolves the conflict.

• Whether the SNDA must be recorded, and whether the title company needs it for the lender’s policy.

Because the estoppel and SNDA go to the same tenant, send them together where the lender’s requirements are known. Two separate requests double the tenant’s review time and the chance that one arrives too late.

Timing the requests

Request the estoppel as soon as the PSA permits, often right after signing, and track the tenant’s response period against the closing date. Note the date each request was sent, the date it is due under the lease, and the date it was received. An overdue estoppel two weeks before closing usually means an extension discussion, and the PSA should already say who bears that cost. If the lender requires a recent estoppel date, plan for a bring-down rather than a late original.

Where Rets fits

Rets tracks each estoppel as requested, received, or overdue on the deal’s diligence checklist, and compares the returned estoppel to the lease and amendments field by field, with page citations for every value. A different expiration date or an amendment missing from the file shows up where the two documents disagree. Lease abstracts carry the same citations, and chat answers questions about the lease from your documents with sources.